Fico Score Essay

For someone to understand their credit and their credit score that comes with it, you have to know what the FICO credit score is. Fico is a special company that gathers information on a person about how they spend their money, who they owe money to and use that information to interpret and come up with a score which is something like that of a rating system. With this information they can even tell if they should extend more credit to your account for those who are credit card holders.

Credit scores are numbers resulted from a statistical analysis of a person 's credit history. They represent the creditworthiness of that person. Credit scores are primarily based on credit report sourced from credit bureaus. Lenders use credit scores to a

Your FICO scores are the most regularly used credit scoring methods all of the bureaus use. Your FICO score

So it is also attractive for Jules Kroll to take this opportunity to enter the credit rating industry. In addition, the “issuer pays” model, which used by the big three rating agencies, lets companies shop around for the best ratings, putting pressure on the agencies to inflate their grades. As a result, it is very difficult to argue that they can adequately represent the users’ side. Therefore, Jules Kroll wants to use another model that can assign unbiased and reliable ratings.

Credit scores take quite a few things into consideration, but not every lender or credit score provider will have the same credit score for you. Although there are many different ways you can get a credit score, the FICO score is the one most commonly used by lenders when determining your creditworthiness.

FICO can help determine if you qualify for a credit or loan. The acronym, stands for Fair Isaac Company. FICO has created a mathematical model for the reporting company, Experian. FICO helps lenders determine the risk of lending money out to certain consumers. In the past, other credit bureaus have had models inspired by the FIco design. FICO contains many questions and calculates your score based on your credit and income-to -debt ratio. Each answer on FICO turns into points. Certain questions include: your current address, late payment history, income-to-debt ratio etc. The most common factors on your FICO score are the outstanding balances on credit cards. FICO asks questions such as: how many accounts you have open, which credit cards carry

The company’s incentive system also encouraged brokers and sales representatives to move borrowers into the subprime category, even if their financial position meant that they belonged higher up the loan spectrum. Brokers who peddled subprime loans received commissions of 0.50 percent of the loan’s value, versus 0.20 percent on loans one step up the quality ladder. For years, a software system in Countrywide’s subprime unit, sales representatives used to calculate the loan type that a borrower qualified for, did not allow the input of a borrower’s cash reserves (Morgenson, 2007).

This is important because credit scores are likely the single largest determinant of whether an applicant will succeed in obtaining the loan they require to purchase the home they want. Credit scores are generally provided by FICO, and they fluctuate depending on payment and credit history.

This is known as a hard inquiry, and it usually knocks a few points from the credit score.

borrower. In assessing the risk and hence the margin, the bank is likely to consider factors such as

It doesn't differentiate between someone who is having a hard time suddenly versus a person who is habitually bad with their money. The score is calculated based on the amount of money that is owed, the payment history, length of the person's credit histor and new credit accounts. This mixture is done by percentages in these

It should be noted, prior to the crisis, there was already an increasing concern of economists and critics about the credit quality that was provided by the financial sector at the time when there was low interest rates that were applied by the government. There were also issues about the inappropriateness or ineffectiveness of the standards that were used in extending credit by the financial sector (Calvo, 171).

Knowing what other outlying debts customers have could be helpful in determining high-risk customers. Along with past credit history this could be helpful in determining customers to reject.

I believed financial sector is one of the fastest growing and most influential elements in our modern society and economy. Financial professionals help companies and organizations stay on top of their own finances, which is a top priority in the wake of the recession. The growing of financial services in the world has brought massive opportunities to utilize newer principles, methodologies, tools and practices in the field of finance. It is this challenging field in which I would like to gain expertise.

As technology improves, the wide use of “hard information”, such as the borrower’s credit history, reduces informational asymmetries. Therefore, long-distance small business lending is easier (Frame, Srinivasan, \& Woosley, 2001; Petersen \& Rajan, 2002). However, even with the use of credit score data, collecting ``soft information" still helps local lenders control risks to avoid delinquency (DeYoung, Glennon, \& Nigro, 2008) and provides informational advances in offering more favorable rates (Agarwal \& Hauswald, 2010).